New Bottom Line Volume 1.2 – Assessing Environmental Performance

July 7, 1992

It’s a familiar aphorism of management that “what gets measured gets done.” By implication, what doesn’t get measured may not get done, or not done as reliably. Measure the wrong thing, and you may get what you think you want, but not the result you really need.

One factor behind many environmental problems is that business has often not measured the right things, and has failed to appropriately couple actions and consequences. In many cases, the “real costs” of a company’s actions simply don’t show up on the company’s books. These externalities are either borne by society at large, or they are forced into management’s attention by regulations, or visionary leadership. In some cases,the costs of environmental action — such as waste disposal costs — do show up on the books, but not in a way that supports intelligent, profitable decisions.

As companies develop environmental quality programs, and identify the goals they want to achieve, the challenge remains of building commitment to those goals into corporate culture, and bringing the practice of managing toward those goals into operating structures and everyday practice at every level of the company.

At Xerox Holland’s manufacturing and remanufacturing plant at Venrey, one environmental goal is to use as many remanufactured parts as possible, according to environmental consultant John Garn. New parts and remanufactured parts run side by side along a production line the length of a football field. Statistical control charts along the production line report on remanufactured parts use and other key quality indicators. The remanufactured parts line, reports Garn, runs at twice the rate of ‘new’ line.

IBM’s San Jose facility has begun direct charging for hazardous waste production, according to Manager of Environmental Programs June Andersen. “If the department that generates waste pays the charges that their activities actually are responsible for,” she observes, as opposed to an averaged charge for the site, “then they’re motivated to reduce generation.”

Dan Fellner, Environmental Communication Specialist at Dow Chemical Corporation headquarters in Midland Michigan, reports that Dow already charges plant supervisors for waste management costs. “These charges used to be site or division specific. Now they’re charged directly to each plant at a site, as part of our overall waste reduction programs.” Environmental performance is part of job performance review at Dow — as it is at a growing number of companies — impacting promotions and pay.

This trend toward measuring or grading environmental performance is the cutting edge for corporate environmental leaders, according to James D. Snyder, writing in Environment Today (May 1992). Snyder sees this as another example of “the enormous–and even widening– lead in environmental management techniques that the hundred or so largest manufacturing corporations have over smaller rivals.” Snyder sees three driving forces behind this trend:

the need to convince skeptics that, in the words of an AT&T employee, “elaborate environmental protection programs …aren’t just PR camouflage”

global competition, as “more governments of developing nations are demanding proof of a corporation’s environmental dedication before granting access or signing deals”; and

the “TQM dictum… that if a company exceeds what’s required for mere legal compliance and pursues its own quality strategy, it has more control over the future because it’s not disrupted by every new regulatory twist.”

Snyder details three levels of “measurement and grading” programs. Duke Power Co. instituted a simple binary scoring system, to get away from a “fragmented” program that tended to emphasize the negatives. Checklists with a series of yes/no questions produce simple cumulative scores, which are tracked for each facility, “rolled up” into department and corporate totals — and are expected to increase year by year.

Sandoz tracks trends ten “key indicators” of environmental quality and performance across 350 manufacturing facilities and a very diverse product line. These include: OSHA lost time & accident rates; total energy and water use; total waste sent for disposal; EH&S investment, expenses, and employees; plus tons of production and total personnel (used for generating ratios).

Polaroid’s Toxic Use and Waste Reduction program goes further, tracking waste of all types for each type of material at each production unit at all 26 plant sites. Reports compute waste generation per square foot of film or per camera manufactured. This data is in turn compiled into indexes of waste reduction at divisional and corporate levels.

Each of these programs contributes to what Dutch industrial engineer Jan Hanhart, in his monograph EcoFeedback, identifies as one of the primary functions of management: “to “provide the ‘operator’ with the information needed for self-control; thus the operator becomes responsible for operator-controllable errors.”

“When you make sure that everybody realizes the real costs,” Stanford University economist Jeremy Bulow concludes, “you’re much better off.” In fact, this is an essential component of any quality program, where accurate and relevant information is likely to generate far more benefit that individual incentive programs. Then employees can, in the words of Libby Ellis, Environmental Grants Program Director at Patagonia/Lost Arrow, “live up to the expectations that you place on them.”

(c) 1992 Gil Friend. All rights reserved.

New Bottom Line is published periodically by Natural Logic, offering decision support software and strategic consulting that help companies and communities prosper by embedding the laws of nature at the heart of enterprise.

Gil Friend, systems ecologist and business strategist, is President and CEO of Natural Logic, Inc.

May be posted intact–including this notice–in any non-commercial forum.

Please inquire at “reprint_rights at natlogic dot com” before reproduction in any commercial forum.